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Murkowski speaks to lawmakers on oil, fuels

Alaska Sen. Lisa Murkowski warned state legislators that declining oil production presents a grave threat to the state's economy.

"Alaska's oil production has declined 36 percent since 2003, even as production in many parts of the Lower 48 has increased," Murkowski said in her annual address to the Legislature Feb. 24.

The state and federal governments should do everything possible to stimulate new oil development on the North Slope, including approval by legislators of Gov. Sean Parnell's proposed changes to the state petroleum production tax, the senator said.

New oil production could come from offshore or places now off-limits like the Arctic National Wildlife Refuge, but the state must also increase production from its own state-owned lands on the North Slope.

"These decisions are in Alaska's hands, and only Alaska can do what's necessary," Murkowski said. "I strongly urge you to act on Governor Parnell's proposed oil tax revisions. I know that not everyone agrees with the governor's proposal but I share his concern that Alaska's tax rates are hurting our competitiveness for oil investment."

Murkowski also said it may be time to discuss other options for using North Slope gas than for a pipeline to the Lower 48. A gas-to-liquids project may be worth considering.

"The things I'm saying may be hard for some to hear. I'm just asking you to think about this," the senator said. "Right now we're showing patience for AGIA," the state's agreement to support TransCanada Corp. with a subsidy.

"A big pipeline is still Alaska's top choice and I'm doing everything possible at the federal level to make it happen," she said. "A number of dominos must fall to make this happen. Building a gas-to-liquids plant would not foreclose our ability to build a gasline. There's more than enough gas waiting to be developed."

A gas-to-liquids plant either on the North Slope or Fairbanks could make high-quality liquid fuels that could be shipped through the trans-Alaska oil pipeline.

High-quality jet fuel made available from a GTL plant in Fairbanks also could encourage the U.S. Air Force to keep nearby Eielson Air Force Base open and active as a center for aerial refueling over North America and the Arctic, Murkowski said.

"I'm not endorsing one project over another. The markets have to decide which is deliverable in a timeframe acceptable to Alaska. But we have to take these options seriously. These deserve full vetting right now, in case we need to pivot to them," Murkowski said.

As for the seriousness of the oil decline, the senator said the state can't depend on gas production to secure its fiscal future.

"Gas simply will not fill our treasury in the way oil has. Not even close. If we expect to maintain our quality of life we must retain and enhance the revenue stream that comes from oil production," the senator said.